OPERATING AGREEMENT ( revised ) ACE ETHANOL, LLC. a Wisconsin limited liability company

Transcription

1 OPERATING AGREEMENT ( revised ) OF ACE ETHANOL, LLC. a Wisconsin limited liability company

2 Table of Contents Page Article 1 General Provisions Section 1.1 Name... 1 Section 1.2 Registered Office and Agent... 1 (a) Initial Office and Agent... 1 (b) Changes... 1 (c) Filing on Change... 1 Section 1.3 Purpose... 2 Article 2 Capital Contributions Section 2.1 Initial Contributions and Membership Units... 2 Section 2.2 Additional Capital Contributions... 2 (a) Contributions... 2 (b) Borrowed Funds... 2 Section 2.3 Return of Capital... 2 Article 3 Capital Accounts Section 3.1 Capital Accounts... 3 (a) Credits... 3 (b) Debits... 3 (c) Transfers... 3 Section 3.2 Interpretation... 3 Article 4 Distributions Section 4.1 Current Tax Distributions... 3 (a) Current Tax Distributions... 3 (b) Additional Tax Distributions... 4 (c) Cash Available for Distribution... 4 Section 4.2 Liquidating Distribution... 4 Article 5 Allocation of Profits and Losses Section 5.1 Allocation of Profits and Losses... 4 Section 5.2 Regulatory Allocations... 4 Section 5.3 Other Allocation Rules... 5 (a) Transfer of Membership Units... 5 (b) Determination of Allocable Amounts... 5 Section 5.4 Tax Allocations... 5 (a) Capital Contributions... 5 (b) Adjustments of Assets Value... 5 (c) Elections... 5 (d) Imputed Interest... 5 Section 5.5 Withholding... 6 i

3 Article 6 Management of the Company Section 6.1 Management... 6 Section 6.2 Election of Directors... 6 Section 6.3 Voting as a Single Class... 7 Section 6.4 Action by Members... 7 (a) Manner of Acting... 7 (b) Meetings... 7 (c) Voting... 7 (d) Notice... 7 (e) Proxies... 7 Section 6.5 Annual Meeting... 8 Section 6.6 Special Meetings... 8 Section 6.7 Place of Meeting... 8 Section 6.8 Restrictions on Authority of Board of Directors... 8 (a) Absolute Restrictions... 8 (b) Restrictions Without Majority Consent... 9 (c) Restrictions Without Two-Thirds Majority Consent... 9 Section 6.9 Authority to Amend... 9 Section 6.10 Authority to Alter Membership in Classes Article 7 Board of Directors Section 7.1 Authority and Power of Board of Directors Section 7.2 Election Section 7.3 Regular Meetings Section 7.4 Special Meetings Section 7.5 Meetings by Electronic Means of Communication Section 7.6 Notice of Meetings Section 7.7 Quorum Requirement Section 7.8 Voting Requirement Section 7.9 Conduct of Meetings Section 7.10 Director's Assent Section 7.11 Action Without a Meeting Article 8 Officers Section 8.1 Officers Section 8.2 Roles of Officers Section 8.3 Multiple Officer Positions Section 8.4 Contract Rights Section 8.5 Compensation Section 8.6 Resignation and Removal Section 8.7 Other Business Activities Article 9 Indemnification Section 9.1 Liability of Officers, Directors and Members Section 9.2 Successful Defense ii

4 Section 9.3 Other Cases Section 9.4 Means of Determining Whether Indemnification is Required Section 9.5 Effect of Termination of Proceeding Section 9.6 Request for Indemnification and Assignment of Claims Required Section 9.7 Allowance of Expenses as Incurred Section 9.8 Insurance Section 9.9 Severability Section 9.10 Continuation of Indemnification Article 10 General Restrictions on Transfers Article 11 Absolute Restrictions on Transfers Article 12 Dissociation and Dissolution, and Liquidation Section 12.1 Effect of Dissociation Section 12.2 Events Causing Dissolution Section 12.3 Filing and Notice Section 12.4 Termination Section 12.5 Distributions of Assets Upon Termination Section 12.6 Limitation on Liability Section 12.7 Waiver of Right to Object Article 13 Books and Records Section 13.1 Books and Records Section 13.2 Company Funds Section 13.3 Availability of Information Section 13.4 Tax Returns Section 13.3 Reports Article 14 Default and Remedies Section 14.1 Default (a) Defaulting Members (b) Non-Monetary Default (c) Monetary Default (d) Indemnification Section 14.2 Remedies (a) Participation (b) Distributions (c) Remedies and Damages Article 15 Miscellaneous Section 15.1 Integration Section 15.2 Binding Provisions Section 15.3 Applicable Law Section 15.4 Separability of Provisions Section 15.5 Dispute Resolution iii

5 (a) Mediation (b) Arbitration (c) Costs Section 15.6 Notice Section 15.7 Counterparts iv

6 OPERATING AGREEMENT OF ACE ETHANOL, LLC. (revised ) THIS AGREEMENT originally made as of June 20, 2001 by and between the undersigned, (collectively, the "Members", and individually, a "Member"), Ace Ethanol, LLC. (the "Company") and Michael V. Salm (the "Organizer"), solely for the purpose of making the acknowledgment at the end of this Agreement. Capitalized terms used in this Agreement without definition shall have the meanings assigned to them in Exhibit A, attached. RECITALS The Members have caused the formation of the Company by having the Organizer file with the Wisconsin Department of Financial Institutions Articles of Organization, a copy of which is attached to this Agreement and incorporated by this reference, as provided in the Wisconsin Limited Liability Company Law (the "WLLCL"); and The parties wish to enter into this Agreement for the purposes of providing the rights, obligations, and restrictions contained in this Agreement and otherwise to govern the operations and management of the Company. NOW, THEREFORE, in consideration of the mutual promises made in this Agreement, the Members agree as follows: ARTICLE 1 General Provisions Section 1.1. Name. The name of the Company is Ace Ethanol, LLC. Section 1.2. Registered Office and Agent. (a) Initial Office and Agent. The principal place of business of the Company and the Company's registered office shall initially be 603 S. Washington, Thorp, Wisconsin, and the Company's registered agent shall be Michael V. Salm. (b) Changes. The Board of Directors shall appoint a new registered agent and change the registered office, if appropriate, if: (i) the then current registered agent resigns or (ii) the board determines to make an appointment or change in the registered agent. (c) Filing upon Change. Upon the appointment of a new registered agent or the change of the registered office, the Secretary shall file or cause the filing of the document required by section of the WLLCL as appropriate to the circumstances. 1

7 Section 1.3. Purpose. The purpose of the Company is to conduct any lawful business permitted under the WLLCL." ARTICLE 2 Capital Contributions Section 2.1. Initial Contribution and Membership Units. The Members shall contribute the amounts set forth on Exhibit B attached to this Agreement as their initial capital contributions, which shall entitle them to the Membership Units set forth on Exhibit B, attached to this Agreement. The Membership Units issued shall be divided into thirteen (13) classes, A through M, with each class consisting of an aggregate of at least One Million ($1,000,000.00) Dollars of initial capital contributions. Membership Units may be subscribed for, and, upon approval of the Board, issued to any person agreeing to be bound by the terms and conditions of this Operating Agreement. The special or relative rights of each Class are set forth in Article 6. The Board of Directors may, in its sole discretion, issue certificates representing the Membership Units. Any such certificates shall be in a form and shall bear a legend in a form as shall be determined by the Board of Directors. Section 2.2. Additional Capital Contributions. The Members shall not be required to make any additional capital contributions or loans to the Company. If, however, the Board of Directors decides by appropriate resolution to seek additional capital contributions, then each Member and each assignee of Financial Rights shall have the right to make such contribution in proportion to its Percentage Interest in the Company and shall have thirty (30) days to make such contribution, or such longer period as the Board of Directors may determine. If the Members do not elect to make all of the capital contributions requested by the Board of Directors, then the Treasurer may accept contributions from both members and non-members for the amount requested within a period of six months of the expiration of the time within which each Member was given the right to make the new contributions. The additional capital contributions of Members shall be given preference over the contributions of non-members, and the additional capital contributions of Members who wish to maintain their proportional Percentage Interest shall be given preference over all new contributions. The Membership Interests so issued shall hold no voting rights unless and until at least 80% of the Members consent to granting voting rights to such Membership Interests. Section 2.3. Non-Cash Contributions. No non-cash contribution(s) may be accepted for one or more Membership Units without the approval of two-thirds of the directors. Section 2.4. Return of Capital. No Member is entitled to withdraw or resign from the Company, to receive a return of any part of the Member's capital contribution, to receive any distribution, or to receive a repayment of any balance in the Member's Capital Account, as defined in Section 3.1, below, except as expressly provided in this Agreement. No Member has the right to demand that distributions be in kind. No Member will be paid interest on any capital contribution or on the Member's Capital Account. 2

8 ARTICLE 3 Capital Accounts Section 3.1. Capital Accounts. There shall be established and maintained with respect to each Member a capital account ("Capital Account") in accordance with the following: (a) Credits. Each Member's Capital Account shall be increased by (1) the Member's Capital Contributions, (2) the Member's allocable share of Profits pursuant to Article 5, below, and (3) the amount of any debt of the Company that is assumed by the Member or that is secured by any property distributed to the Member. (b) Debits. Each Member's Capital Account shall be decreased by (1) the amount of cash and the Asset Value of any property distributed to the Member, (2) the Member's allocable share of Losses pursuant to Article 5, below, and (3) the amount of any debt of the Member that is assumed by the Company or secured by any property contributed by the Member to the Company. (c) Transfers. In the event any Member assigns all or any part of the Member's Membership Units in accordance with the terms of this Agreement, the Transferee shall succeed to the Capital Account of the Transferor to the extent the Capital Account relates to the transferred Membership Units. Section 3.2. Interpretation. The provisions of Section 3.1, above, and the other provisions of this Agreement relating to the maintenance of Capital Accounts are intended to comply with section (b) of the Treasury Regulations, the terms and requirements of which are incorporated in this Agreement by reference, and shall be interpreted and applied in a manner consistent with those terms and requirements. If, in the reasonable opinion of the Company's accountants, the manner in which Capital Accounts are to be maintained pursuant to the preceding provisions of this Article should be modified to comply with section 704(b) of the Code and the Regulations thereunder, then notwithstanding anything to the contrary contained in the preceding provisions of this Article 3, the method in which Capital Accounts are maintained shall be so modified; provided, however, that any change in the manner of maintaining Capital Accounts shall not materially alter the economic agreement between or among the Members. Section 4.1. Current Distributions. ARTICLE 4 Distributions (a) Current Tax Distributions. To the extent permitted by law and consistent with the Company's obligations to its creditors as determined by the Board of Directors, the Company shall make Tax Distributions on or before the Tax Distribution Dates. The aggregate amount of the Tax Distribution made with respect to any given Tax Distribution Date shall be the product of (i) the Company's estimated federal taxable income under the provisions of the Internal Revenue Code (the "Code"), for the Fiscal Period ending on the last day of the calendar month immediately preceding the Tax Distribution Date and commencing on the first day of the 3

9 calendar month that includes the immediately previous Tax Distribution Date, multiplied by (ii) the applicable Tax Rate. Notwithstanding the foregoing, to the extent the Company has had an estimated federal taxable Loss for any prior Fiscal Period in that Fiscal Year, the amount in clause (i), above, shall be reduced by that portion of the Loss remaining after reducing taxable income for prior Fiscal Periods in the Fiscal Year for the loss. Each Member shall receive a Tax Distribution proportional to the amount of federal taxable income to be allocated to the Member pursuant to Article 5, below. (b) Additional Tax Distributions. In the event any income tax return of the Company, as a result of an audit or otherwise, reflects items of income, gain, loss, or deduction that are different from the amounts estimated pursuant to Section 4.1(a), above, with respect to a Fiscal Year in a manner that results in additional income or gain of the Company being allocated to the Members' Capital Accounts, an additional Tax Distribution shall be made under the principles of Section 4.1(a), above, to the Members (or former Members) who are allocated the additional income or gain, except that (i) the last day of the calendar month in which the adjustment occurs shall be treated as a Tax Distribution Date, (ii) the amount of the additional income or gain shall be treated as the Company's federal taxable income, and (iii) the applicable Tax Rate shall be that which applied for the Fiscal Period to which the additional income or gain relates. (c) Cash Available for Distribution. When and as approved by the Board of Directors, Cash Available for Distribution shall be distributed to the Members in proportion to their Percentage Interests during the Fiscal Period to which the distribution relates. Section 4.2. Liquidating Distributions. If the Company is liquidated pursuant to Article 12, below, the assets to be distributed pursuant to Section 12.5(d)(iii), below, shall be distributed to the Members in proportion to their Percentage Interests. ARTICLE 5 Allocation of Profits and Losses Section 5.1. Allocation of Profits and Losses. Except as provided in Sections 5.2, 5.3, and 5.4, below, Profits and Losses shall be allocated among the Members in proportion to their Percentage Interests for the Fiscal Period. Section 5.2. Regulatory Allocations. This Agreement shall be deemed to contain provisions relating to "minimum gain chargeback," "nonrecourse deductions," "qualified income offset," "gross income allocations," and any other provision required to be contained in this Agreement pursuant to the Treasury Regulations promulgated under section 704(b) of the Code (the "Regulatory Allocations"), other than any requirement that a Member be required to contribute to the Company an amount equal to any deficit in the Member's capital account. No allocation of Loss shall be made to a Member if the allocation would result in a negative balance in the Member's Capital Account in excess of (a) the amount the Member has loaned to the Company or (b) the amount of the Company's debt that the Member has guaranteed. In the event there is a negative balance in the Member's Capital Account in excess of the amount(s) set 4

10 forth above, the Member shall be allocated income and gain in the amount of that excess as quickly as possible. Any Loss that cannot be allocated to a Member pursuant to the restrictions contained in this paragraph shall be allocated to other Members. The Regulatory Allocations are intended to comply with the Treasury Regulations promulgated under section 704(b) of the Code. The other provisions of this Article 5 notwithstanding, the Regulatory Allocations shall be taken into account in allocating other Profits, Losses, and items of income, gain, and deduction among the Members so that, to the extent possible, the net amount of the allocations of other Profits, Losses, and other items and the Regulatory Allocations to each Member shall equal the net amount that would have been allocated to each such Member if the Regulatory Allocations had not occurred. Section 5.3. Other Allocation Rules. (a) Transfer of Membership Units. If a Member transfers all or any portion of the Member's Membership Units pursuant to this Agreement during any Fiscal Period, the Profits (or Losses) allocated to the Members for each such Fiscal Period shall be allocated among the Members in proportion to their respective Percentage Interests from time to time during the Fiscal Period, in accordance with section 706 of the Code, using any convention permitted by law and selected by the Board of Directors. (b) Determination of Allocable Amounts. The Profits, Losses, or any other items allocable to any Fiscal Period shall be determined on a daily, monthly, or other basis, as determined by the Board of Directors, using any permissible method under section 706 of the Code and the Treasury Regulations under that section. Section 5.4. Tax Allocations. (a) Capital Contributions. In accordance with section 704(c) of the Code and the Treasury Regulations under that section, income, gain, loss, and deduction with respect to any contribution to the Company's capital shall, solely for tax purposes, be allocated among the Members so as to take account of any variation between the property's adjusted basis to the Company for federal income tax purposes and its initial Asset Value. (b) Adjustment of Asset Value. If the Asset Value of any Company asset is adjusted, subsequent allocations of income, gain, loss, and deduction with respect to the asset shall take account of any variation between the asset's adjusted basis for federal income tax purposes and its Asset Value as so adjusted in the same manner as under section 704(c) of the Code and the Treasury Regulations under that section. (c) Elections. Any elections or other decisions relating to the allocations shall be made by the Board of Directors in any manner that reasonably reflects the purpose and intent of this Agreement. (d) Imputed Interest. To the extent the Company has interest income or deductions with respect to any obligation of or to a Member pursuant to section 483, sections , or 5

11 section 7872 of the Code, the interest income or deductions shall be specially allocated to the Member to whom the obligation relates. Section 5.5. Withholding. If the Company is required pursuant to the Code or any other provision of law to withhold (or otherwise remit to a government agency) any amount based on amounts otherwise distributable or allocable to any Member, the Company shall withhold the amounts as required by law and any amounts so withheld shall be deemed to have been distributed to such Member under this Agreement. If any sums are withheld pursuant to this provision, the Company shall remit the sums so withheld to, and file the required forms with, the Internal Revenue Service or other applicable government agency. In the event of any claimed overwithholding, a Member shall be limited to an action against the Internal Revenue Service or other applicable government agency for refund and each Member hereby waives any claim or right of action against the Company on account of such withholding. Furthermore, if the amount required to be withheld exceeds the amount that would otherwise have been distributed to such Member, such Member shall remit any deficiency to the Company within ten (10) days after notice, and such amount shall not be considered capital contributions by such Member nor shall the Company otherwise be obligated to return to such Member any such amount unless such amount is refunded to the Company by the applicable withholding agency. If such deficiency is not remitted within such time, any non-remitted amount shall be considered a demand loan from the Company to such Member, with interest at a rate equal to the lesser of twelve percent (12%), or the highest rate permitted by law, which interest shall be treated as an item of the Company s income, until discharged by such Member, upon repayment. Such demand loan shall be repaid, without prejudice to other remedies at law or in equity that the Company may have, out of distributions to which the debtor Member would otherwise be entitled under this Agreement. ARTICLE 6 Management of the Company Section 6.1. Management. Except as otherwise provided herein, management of the Company is vested in its Managers, who shall be referred to collectively as Directors, the Board or the Board of Directors. Section 6.2. Election of Directors. With respect to the election of directors to the Board of Directors: (a) The holders of each Class of Membership Units, voting as a separate class, shall be entitled to elect one of their Members as a director to sit on the Board of Directors of the Company. (b) The holders of each Class of Membership Units, voting as a separate class, shall be entitled to vote, on the removal, with or without cause, of any director elected by that Class of Membership Units. (c) Any vacancy in the office of a director elected by the holders of a Class of Membership Units may be filled by a vote of these holders, voting as a separate class, and, in the absence of such a vote, in the case of a vacancy in the office of a director elected by a Class, the vacancy may be filled by the remaining directors. Any director elected by the other directors to 6

12 fill a vacancy shall serve until the next annual meeting of the Members and until his or her successor has been chosen and has qualified. (d) The holders of each Class of Membership Units shall be entitled to vote as separate classes on any other matters as required by law or in this Agreement. (e) Notwithstanding any provision herein to the contrary, Members holding Class P Membership Units shall not be entitled to vote, either as separate class or as part of the single class, and shall not be entitled to elect a director. Section 6.3. Voting as Single Class. The Members shall, in all matters not specified in the preceding paragraph of this Section, vote together as a single class. Section 6.4. Actions by Members. Any actions of the Members shall be taken in the manner set forth below. For the purposes of this Section, Membership Units without voting rights shall be ignored for the purpose of determining whether or not a quorum or Majority Consent exists. No prior notice shall be required for any action taken by unanimous written consent. (a) Manner of Acting. Except as otherwise provided in this Agreement, the consent of the Members to any act or failure to act may be given by Majority Consent at a meeting in which a quorum of the Members participate in person, by proxy, by telephone or by other electronic means. Members holding sufficient Membership Units to give Majority Consent to the action taken at any meeting shall constitute a quorum of the Members at the meeting. Alternatively, the Members may act, either as a separate class or together as a single class, by unanimous written consent without the need for a meeting. (b) Meetings. Meetings of the Members may be called as provided in Section 6.6. Meetings not held by electronic means shall be held at the Company's principal place of business or at such other place as may be designated by Majority Consent of the Members. (c) Voting. Each Member shall vote all of the Member's Membership Units in the same manner as to any given matter submitted for consent. (d) Notice. Notice shall be given not less than 5 business days before the meeting being noticed, or 7 business days before the meeting being noticed if the notice is given by mail or private carrier. No matter shall be voted upon at a meeting of Members unless the appropriate notice of the matter to be voted on is given or such notice is waived by any Member not receiving it. A Member shall be deemed to have waived notice of any matter acted upon at any meeting that the Member attends or in which the Member participates unless at the beginning of the meeting or promptly upon commencement of the Member's participation in the meeting the Member objects to the consideration of the matter because of lack of proper notice. No prior notice shall be required for any action taken by written consent. (e) Proxies. A Member entitled to vote may vote in person or by proxy appointed in writing by the Member or by his or her duly authorized attorney-in-fact. No person who does not 7

13 meet the qualifications to be a Member of the Company may hold or vote a Member's proxy. A proxy appointment shall become effective when received by the secretary or other officer or agent of the Company authorized to tabulate votes. Unless otherwise provided in the appointment form, a proxy appointment may be revoked at any time before it is voted, either by written notice filed with the secretary or other officer or agent of the Company authorized to tabulate votes, or by oral notice given by the Member during the meeting. The presence of a Member who has filed his or her proxy appointment shall not of itself constitute a revocation. A proxy appointment shall be valid for 11 months from the date of its execution, unless otherwise provided in the appointment form. The board of directors shall have the power and authority to make rules establishing presumptions as to the validity and sufficiency of proxy appointments. Section 6.5. Annual Meeting. The annual members' meeting shall be held on the Seventh Day of the Second Week of March each year at 1 o clock p.m., or at such other date and time within 30 days before or after this date as may be fixed by or under the authority of the Board of Directors, for the purpose of electing directors and transacting such other business as may come before the meeting. If the day fixed for the annual meeting is a legal holiday in Wisconsin, the meeting shall be held on the next succeeding business day. Section 6.6. Special Meetings. Special members' meetings may be called (1) by the President, or (2) by the Board of Directors, or (3) shall be called by the President upon the written request of members holding a Percentage Interest of at least 10% of all the votes entitled to be cast upon the matter(s) set forth as the purpose of the meeting in the written request. Upon delivery to the President of a written request pursuant to (3), above, stating the purpose(s) of the requested meeting, dated and signed by the person(s) entitled to request such a meeting, it shall be the duty of the Secretary to give, within 30 days of such delivery, notice of the meeting. Only business within the purpose described in the special meeting notice shall be conducted at a special members' meeting. Section 6.7. Place of Meeting. The Board of Directors may designate any place, either within or outside the state of Wisconsin, as the place of meeting for any annual or special members' meeting or any adjourned meeting. If no designation is made by the Board of Directors, the place of meeting shall be the Company's principal office. Section 6.8. Restrictions on Authority of Board of Directors. (a) Absolute Restrictions. The Board of Directors shall not have the authority to: (i) Do any act that is in contravention of applicable law or this Agreement or that would make it impossible to carry on the ordinary business of the Company; (ii) Possess property of the Company or its Controlled Affiliates, or assign rights in or to such property, other than in furtherance of the Company s business or interests; or (iii) Perform any act that would subject the Members to liability in any jurisdiction except as expressly provided in this Agreement. 8

14 (iv) Amend the Articles of Organization or this Operating Agreement. (b) Restriction Without Majority Consent. Without Majority Consent, the Board of Directors, shall not have the authority and shall take no action, either directly or indirectly through a Controlled Affiliate, to: (i) Consummate a transaction or planned series of transactions resulting in a Change of Control; (ii) Purchase any asset outside the ordinary course of business; or purchase one or more Capital Assets having an aggregate cost exceeding the Annual Limit, whether in a single transaction, or a planned series of transactions within the same calendar year; (iii) Dispose of any asset outside the ordinary course of business; or dispose of one or more Capital Assets having an aggregate fair market value exceeding the Annual Limit, whether in a single transaction, or a planned series of transactions within the same calendar year; (iv) Borrow or obtain credit which would result in outstanding debt in excess of the Annual Limit, whether in a single transaction or a planned series of transactions; with the caveat that the Board may refinance, renew, extend or renegotiate the terms of an outstanding debt instrument previously approved by members unless the underlying note has been fully paid, satisfied and cancelled; and (v) Acquire an interest in another legal entity, other than a Controlled Affiliate. (c) Restriction Without Two-Thirds Majority Consent. Without Two-Thirds Majority Consent, the Board of Directors shall not have the authority to: (i) Wind up, dissolve or liquidate the Company; (ii) Make changes in the tax or accounting policies that would have a material effect on distributions; or (iii) File for protection under the bankruptcy laws of the United States. Section 6.9. Authority to Amend. The Members shall have the authority to amend the Articles of Organization and the Operating Agreement upon Two-Thirds Majority Consent except that in no case may the Articles of Organization or this Operating Agreement be altered in a way that would diminish the rights or value of the membership interest of any specific Member, or alter this Agreement in a way that would alter the rights of any specific Member, in a way that did not apply to Members generally, without that Member s consent. Section Authority to Alter Membership in Classes. Once the membership in a Class has been established and a director for that Class elected, then new voting Members may not be added to that Class without the 80% Majority Consent of the Members of the Class affected. 9

15 ARTICLE 7 Board of Directors Section 7.1. Authority and Powers of Board of Directors. Except as otherwise required in this Agreement, the Board of Directors is authorized and responsible for the overall operations of the Company's business, including, but not limited to, the right to: (a) Establish an annual budget, borrow money and procure temporary, permanent, conventional, or other financing or refinancing on such terms and conditions, at such rates of interest, and from such parties as are approved, and, if security is required for the loan, to mortgage or subject to another security interest the Company assets; (b) Insure the Company's activities and property; (c) Perform all other acts or activities customary or incident to the overall operation of a business such as that conducted by the Company; (d) Elect officers, and authorize and appoint such other officers as the Board determines from time to time are necessary, and appoint the registered agent and/or change the registered office pursuant to Section 1.2, above; (e) Retain attorneys, accountants, and other professionals; (f) Establish reserves and thereafter maintain the reserves in such amounts as the Board may deem appropriate; and (g) Establish bank and money market accounts for the Company's benefit. Section 7.2. Election. Directors shall be elected by the Members as provided in Article 6 at each annual Members' meeting. Section 7.3. Regular Meetings. A regular meeting of the Board of Directors shall be held without other notice immediately after the annual Members' meeting. The place of the regular Board of Directors' meeting shall be the same as the place of the Members' meeting that precedes it, or such other suitable place as may be announced at the Members' meeting. The Board of Directors may provide, by resolution, the time and place, either within or outside the state of Wisconsin, for the holding of additional regular meetings. Section 7.4. Special Meetings. Special meetings of the Board of Directors may be called by or at the request of the chairperson of the board, if any, the President or any two directors. The person or persons authorized to call special Board of Directors' meetings may fix any place, either within or outside the state of Wisconsin, as the place for holding any special board meeting called by them, and if no other place is fixed, the meeting place shall be the Company's principal office in the state of Wisconsin, but any meeting may be adjourned to reconvene at any place designated by vote of a majority of the directors in attendance at the meeting. 10

16 Section 7.5. Meetings by Electronic Means of Communication. The Board of Directors may, in addition to conducting meetings in which each director participates in person, and notwithstanding any place set forth in the notice of the meeting or this Agreement, conduct any regular or special meeting by the use of any electronic means of communication, provided (1) all participating directors may simultaneously hear each other during the meeting, or (2) all communication during the meeting is immediately transmitted to each participating director, and each participating director is able to immediately send messages to all other participating directors. Before the commencement of any business at a meeting at which any directors do not participate in person, all participating directors shall be informed that a meeting is taking place at which official business may be transacted. Section 7.6. Notice of Meetings; Waiver of Notice. Notice of each Board of Directors' meeting, except meetings pursuant to Section 7.3 of this Agreement, shall be delivered to each director at his or her business address or at such other address as the director shall have designated in writing and filed with the secretary. Notice may be given orally or communicated in person, by telephone, telegraph, teletype, facsimile, other form of wire or wireless communication, private carrier, or in any other manner provided by statute. Notice shall be given not less than 5 business days before the meeting being noticed, or 7 business days before the meeting being noticed if the notice is given by mail or private carrier. Written notice shall be deemed given at the earlier of the time it is received or at the time it is deposited with postage prepaid in the United States mail or delivered to the private carrier. Oral notice is effective when communicated. A director may waive notice required under this section or by law at any time, whether before or after the time of the meeting. The waiver must be in writing, signed by the director, and retained in the corporate record book. The director's attendance at or participation in a meeting shall constitute a waiver of notice of the meeting, unless the director at the beginning of the meeting or promptly upon his or her arrival objects to holding the meeting or transacting business at the meeting and does not thereafter vote for or assent to action taken at the meeting. Neither the business to be transacted at nor the purpose of any regular or special Board of Directors' meeting need be specified in the notice or waiver of notice of the meeting. Each director shall have the right to be present at any Board of Directors meeting by proxy, upon presentation of his written notice of proxy made at such meeting, and to participate at any Board of Directors meeting by telephone if he gives at least one day s notice of his intent to do so. Section 7.7. Quorum Requirement. A majority of the number of directors shall constitute a quorum for the transaction of business at any Board of Directors' meeting. These provisions shall not, however, apply to the determination of a quorum for actions taken pursuant to Article 7 of this Agreement or actions taken under any other provisions of this Agreement that fix different quorum requirements. Section 7.8. Voting Requirement. The affirmative vote of the majority of the directors present at a meeting at which a quorum is present shall be the act of the Board of Directors. In the event that the vote of the directors on any matter brought before the Board results in a tie, the President shall be entitled to vote on the matter, acting as a director. These provisions shall not, however, apply to any action taken by the Board of Directors pursuant to Section

17 Section 7.9. Conduct of Meetings. The chairperson of the Board of Directors, and in his or her absence, the President, and in their absence, any director chosen by the directors present, shall call Board of Directors' meetings to order and shall act as chairperson of the meeting. The presiding officer may appoint any director, or other person present to act as secretary of the meeting. The chairperson of the meeting shall determine if minutes of the meeting are to be prepared, and if minutes are to be prepared, shall assign a person to do so. Section Directors' Assent. A director of the Company who is present and is announced as present at a meeting of the Board of Directors, at which meeting action on any corporate matter is taken, shall be deemed to have assented to the action taken unless (1) the director objects at the beginning of the meeting (or promptly upon his or her arrival) to holding the meeting or transacting business at the meeting; (2) the director dissents or abstains from an action taken and minutes of the meeting are prepared that show the director's dissent to or abstention from the action taken; or (3) the director delivers written notice of his or her dissent or abstention to the presiding officer of the meeting before the meeting's adjournment or to the Company immediately after the adjournment; (4) the director dissents or abstains from an action taken, minutes of the meeting are prepared that fail to show the director s dissent or abstention, and the director delivers to the Company a written notice of that failure promptly after receiving the minutes. The right of dissent or abstention is not available to a director who votes in favor of the action taken. Section Action Without a Meeting. Any action required or permitted by this Agreement to be taken by the Board of Directors at a board meeting may be taken without a meeting if one or more written consents, setting forth the action so taken, shall be signed by all of the directors entitled to vote on the subject matter of the action and retained in the corporate records. Action taken pursuant to written consent shall be effective when the last director signs the consent or upon such other effective date as is specified in the consent. ARTICLE 8 Officers Section 8.1. Officers. The Company shall have one or more natural persons exercising the functions, however designated, of the Chairman of the Board, Vice Chairman of the Board, President, Secretary and Treasurer. The Board of Directors may appoint any other officers, assistant officers or agents the Board of Directors deem necessary or appropriate for the operation and management of the Company, each of whom shall have the powers, rights, duties, responsibilities and terms in office determined by the Board of Directors from time to time. Such officers shall hold their offices until their successors are elected and have qualified; provided, however, that any officer may be removed at any time by the Board of Directors. Section 8.2. Roles of Officers. Unless a resolution adopted by the Board of Directors provides otherwise, the officers shall fill the roles set forth in this Section 8.2 The Chairman of the Board of Managers shall preside at all meetings of the Board of Managers. The Vice Chairman, in the absence or disability of the Chairman, shall perform the duties of the Chairman 12

18 in the order determined by the Board of Managers. The President shall have responsibility for the active management of the business of the Company and shall see that all orders and resolutions of the Board of Directors are carried into effect. The President shall not sign and deliver in the name of the Company any deeds, mortgages, bonds, contracts or other instruments pertaining to the business of the Company, except in cases in which the authority to sign and deliver is expressly delegated by the Board of Directors. The President shall, in general, perform all duties usually incident to the position of President and such other duties as may from time to time be prescribed by the Board of Directors. The Secretary shall have the duties specified in this Section. The Secretary shall take or cause to be taken minutes of a proceeding of the Board of Directors in a book kept for the purpose; shall give or cause to be given all notices required by law, or this Operating Agreement, shall certify all proceedings of the Board of Directors and of the Members; and shall perform such additional duties as are prescribed by the Board of Directors. The Treasurer shall have the duties specified in this section. The Treasurer shall cause to be kept accurate financial records of the Company; shall cause to be made deposits of all money, drafts and checks in the name of and to the credit of the, Company in the banks and depositories designated by the Board of Directors; shall cause to be endorsed for deposit all notes, checks and drafts received by the Company as ordered by the Board of Directors, causing to be made proper vouchers therefor, except to the extent that some other person or persons may be specifically authorized by the Board of Directors to do so; shall cause to be disbursed funds of the Company and cause the issuance of checks and drafts in the name of the Company, as authorized by the Board of Directors; cause to be rendered to the Chairman of the Board of Directors whenever requested, an account of all transactions by the Treasurer and of the financial condition of the Company; and shall perform such other duties as may be prescribed by the Board of Managers or the Chairman from time to time. Section 8.3. Multiple Officer Positions. Any number of Officer positions or functions of those positions may be held or exercised by the same person, except that the Chairman of the Board and Secretary may not be the same person. If a document must be signed by persons holding different positions or functions and a person holds or exercises more than one of those positions or functions, that person may sign the document in more than one capacity, but only if the document indicates each capacity in which the person signs. Section 8.4. Contract Rights. The election or appointment of a person as an officer or agent of the Company shall not, of itself, create contract rights. The Company may enter into an employment contract with an officer or agent for a period of time if, in the judgment of the Board of Directors, the contract would be in the best interests of the Company. The fact that the contract may be for a term longer than the terms of the directors who authorized or approved the contract shall not make the contract void or voidable. Section 8.5. Compensation of Officers. The salaries of all officers of the Company shall be fixed from time to time by the Board of Directors. Section 8.6. Resignation and Removal. An officer may resign at any time by giving written notice to the Company at its principal executive office. The resignation is effective without acceptance when the notice is given to the Company, unless a later effective date is specified in the notice. Any such resignation shall be without prejudice to any rights of the 13

19 Company against the officer under his or her contract. An officer may be removed at any time by the Board of Directors. Section 8.7. Other Business Activities. The Members and their respective officers, directors, shareholders, partners, and affiliates may engage independently or with others in other business ventures of every nature and description, including without limitation business ventures that are competitive with the Company. Neither the Company nor any Member shall have any right by virtue of this Agreement, or the relationship created by this Agreement, in or to such other ventures or activities or to the income or proceeds derived from such other ventures or activities, and the pursuit of such ventures shall not be deemed wrongful or improper. Notwithstanding the foregoing, no Member (or their respective officers, directors, shareholders, partners, and affiliates) may engage, directly or indirectly, in the development or construction of an ethanol plant within 100 miles of Stanley, Wisconsin until the ethanol plant to be owned by the Company is completed, and Delta-T may not engage, directly or indirectly, in the development or construction of any ethanol plant within a 60 mile radius of such location unless it first offers to sell its membership interest in the Company for a price equal to the book value of its membership interest, payable in cash within 30 days of the Company s acceptance of the offer, and gives the Company at least 30 days to accept such offer. Such notice shall be deemed a Notice of Transfer under Section 10.3 (a) below. Each member who is not a natural person shall be deemed to represent upon signature of this Agreement that it has, or will promptly upon signature of this Agreement, entered into binding and enforceable agreements with its officers, directors, shareholders, partners and affiliates sufficient to bind them to comply with this Agreement. Nothing in this Agreement shall be deemed to prohibit the Members or their respective officers, directors, shareholders, partners, and affiliates from dealing with the Company, provided that each such transaction is approved by a majority of the Board, exclusive of directors who are officers, directors or employees of the Member(s) involved, and provided further that such transaction is determined by the voting Directors to be in the best interest of the Company. ARTICLE 9 Indemnification Section 9.1. Liability of Officers, Directors and Members. No officer, Director or Member shall be liable to the Company for any loss or damage suffered by the Company on account of any action taken or omitted to be taken by the officer, Director or Member, that the officer, Director or Member in good faith believed to be in or not opposed to the Company's best interests, and with respect to any criminal action or proceeding, that the officer, Director or Member had no reasonable cause to believe was unlawful. In addition, no officer, Director or Member shall be liable to the Company for any loss or damage suffered by the Company on account of any action taken or omitted to be taken in reliance upon advice of counsel for the Company or upon statements made or information furnished by officers or employees of the Company that the officer, Director or Member had reasonable grounds to believe to be true. The foregoing shall not be exclusive of other rights and defenses to which the officer, Director or Member may be entitled as a matter of law. 14

20 Section 9.2. Successful Defense. The Company shall indemnify the officer, Director and Members to the extent the officer, director or any Member has been successful on the merits or otherwise in the defense of a claim, action, dispute, or issue such that the Person has no liability for all Expenses incurred in connection with the claim, action, dispute, or issue, if the Person was a party due to the Person's role as officer, Director or Member. Indemnification under this Section 9.2 shall be made within 10 days of receipt by the Company of a written demand for indemnification. Section 9.3. Other Cases. In cases not included under Section 9.2, above, the Company shall indemnify the officer, Director or any Member against Liability and Expenses incurred by the Person in connection with a claim, action, dispute, or issue, if the Person was a party due to the Person's role as officer, director or Member, unless it shall have been concluded that the Person breached or failed to perform a duty owed to the Company (using the procedure set out in Section 9.4, below), which breach or failure constitutes: (a) A willful failure to deal fairly with the Company in connection with a matter in which the Person has a material conflict of interest; (b) A violation of criminal law, unless the Person had reasonable cause to believe the Person's conduct was lawful or no reasonable cause to believe the conduct was unlawful; (c) A transaction from which the Person derived an improper personal profit; or (d) Willful misconduct. Indemnification required under this section 9.3 shall be made upon the last to occur of (1) 30 days after the Company's receipt of a written demand for indemnification or (2) the determination set forth in Section 9.4, below. Section 9.4. Means of Determining Whether Indemnification Is Required. Unless otherwise provided by a written agreement between the officer, Director or Member and the Company, the right to indemnification under Section 9.3, above, shall be determined by Majority Consent with the Membership Units of a Member seeking indemnification excluded from voting for this purpose unless all Members are seeking indemnification. If the Members determine that a Person seeking indemnification under Section 9.3, above, is not entitled to indemnification, and the Person does not agree with that determination, the matter shall be determined by arbitration pursuant to Section 14.7, below. Section 9.5. Effect of Termination of Proceeding. The termination of a claim, action, dispute, or issue by judgment, order, settlement, or conviction, or upon a plea of no contest or an equivalent plea, does not, by itself, create a presumption that indemnification of the officer, Director or Member is not required under this Article. Section 9.6. Request for Indemnification and Assignment of Claims Required. To seek indemnification, the officer, Director or Member shall make a written request to the Company. As a further precondition to any right to receive indemnification, the writing shall contain a 15